Explain which method shows the strongest liquidity and solvecl pau whlet mehod best reflects the true financial condition of the company. (c) Prepare G Company's consolidated balance sheet immediately after the combination using the worksheet approach and using the acquisition method. Problem 3-4 Three companies, A, L, and M, whose December 31, Year 5, balance sheets appear below, have agreed to combine as at January 1, Year 6. Each of the companies has a very small proportion of an intensely competitive market dom- inated by four much larger companies. In order to survive, they have decided to merge into one company. The merger agreement states that Company A will buy the assets and liabilities of each of the other two companies by issuing 27,000 common shares to Company L and 25,000 common shares to Company M, after which the two companies will be wound up. Company A's shares are currently trading at $5 per share. Company A will incur the following costs: Costs of issuing shares Professional fees 8,000 20,000 $28,000 152 CHAPTER 3 Business Combination The following information has been assembled regarding the three companies: COMPANY A Carrying Amount $ 99,900 147,600 $247,500 $ 80,000 75,000 92,500 $247,500 Current assets Plant and equipment (net) Fair Value $102,000 160,000 75,000 Liabilities Common shares (50,000 shares) Retained earnings COMPANY L Carrying Amount $ 60,000 43,000 $153,000 Fair Value Current assets Plant and equipment (net) 65,000 q8,000 35,000 48,000 70,000 $153.000 36,000 Liabilities Common shares (24,000 shares) Retained earnings COMPANY M Carrying Amount $52,000 115,000 $167,000 $ 72.000 60,000 35,000 $167,000 Fair Value $68,000 120,000 Current assets Plant and equipment (net) 70,000 Liabilities Common shares (33,000 shares) Retained earnings Required Prepare the balance sheet of Company A on January 2, Year 6, after Company L and CompanyM have been wound up. Problem 3-5